Friday, April 24th, 2020
Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.
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Now, onto this week’s issue.
US Crude Futures Turn Negative The Same Day as the 10th Anniversary of the Deepwater Horizon Oil Spill
I’m not a superstitious guy but I couldn’t help but notice that US crude futures turned negative the very day of the 10th anniversary of the Deepwater Horizon oil spill.
What are the chances that the worst oil crash in history came on the same day as the 10th anniversary of the worst oil spill in history?
What to make of this? Where do we begin? Is this a sign from the gods that we are producing too much oil? It seems the consensus by producers and traders alike is that we are producing too much given what the real demand is during this slowed down economy.
+ Why is the oil price negative and can you buy some? An explainer – Vice Motherboard
EKT Interactive’s very own Vice President, Doug Stetzer, sat down with Vice Motherboard to discuss why oil prices turned negative and the process for getting paid to buy oil. It’s not as easy as you may think.
The short answer is it all has to do with storage (see Energized #52).
Doug does a good job discussing the difference between the futures market and the spot market.
“As much as we talk about commodities as a number or an imaginary contract, there’s a physical aspect to it,” Doug Stetzer, vice president of EKT Interactive, a company that trains people going into the oil industry about how it works, told Motherboard. “If you own a contract of crude oil, when it executes, technically, you have to take delivery of the physical crude oil.”
It’s a great article that explains why a futures market would collapse as it has, and the simple fact that storing oil isn’t as easy as it sounds. From a logistical and regulatory standpoint, transporting and storing crude requires a lot of time, the right permits, and the right safety process.
Doug did a superb job in his interview with Vice so I encourage all of you to check out the article and share it with your personal and professional networks so they too will have a better idea of what’s going on.
+April 2020 Oil Market Analysis – Commodity Research Group
If you want to get a bit of commentary as to what was happening just before this unprecedented event, be sure to listen to the episode of the CRG podcast released just a few days ago where they pretty much called a price collapse, but even then probably not to this extreme extent.
Remembering Deepwater Horizon: why it happened, where we’ve come since then
Deepwater Horizon – Wikipedia
“On 20 April 2010, while drilling at the Macondo Prospect a blowout caused an explosion on the rig that killed 11 crewmen and ignited a fireball visible from 40 miles away. The fire was inextinguishable and, two days later, on 22 April, the Horizon sank, leaving the well gushing at the seabed and causing the largest marine oil spill in history.”
Deepwater Horizon was the deepest oil rig of its time, at a vertical depth of 35,050 feet and measured depth of 35,055 feet.
+ Offshore drilling safety: Deepwater Horizon to BSEE – EKT Interactive
In this episode of Sound Off, Joe Perino gives some background on how the BP Macondo / Deepwater Horizon incident in the Gulf of Mexico led to the current trends in offshore drilling safety.
Joe gets into what caused the Deepwater Horizon systems to fail as well as the government response to changes in oversight and regulation of offshore drilling.
As Joe mentions, this included a swift shake-up of which government bodies oversee this part of oil and gas operations.
“The best technical description of what happened. Many small human errors combined to create the conditions for this tragic accident.”
Great animation of just how tragic the system failures were for Deepwater Horizon.
+ Where did the Deepwater Horizon oil go? -National Science Foundation
“The location of 2 million barrels of oil thought to be trapped in the deep ocean has remained a mystery. Until now.”
+ Railroad Commission delays vote on state-mandated oil production cuts – The Houston Chronicle
The TRC is considering instructing Texas drillers to cut production to boost oil prices. “The Railroad Commission hasn’t enforced such a requirement since the early 1970s.”
Have a great weekend!
EKT Interactive Managing Editor